Phones 4u could be the subject of a bidding war following discussions
between operators to buy the retail business.

Some operators are collaborating for a potential carve-up of Phones 4u’s highly rated 450 store estate, direct sales and insurance assets.

The proposals are reminiscent of the deal initiated by O2 in June 2006 to buy The Link’s 300 stores for £30m, and split them across a range of mobile networks and retailers.

However, a Phones 4u deal would differ, as the retailer is believed to be performing much better than The Link was prior to its sale. Also, Phones 4u is not participating in the deal making at this stage. At least one network is believed to be considering to break out on its own to buy Phones 4u.

One senior operator source said: ‘There is either an elegant solution of everyone getting a share, or a more aggressive push [by one party] to go alone. The objective [from operators] is the same: bring calm to the market.’

The discussions come after Orange CEO Tom Alexander and VP for sales and retention Jean-Pascal Van Overbeke discussed potential deals with Phones 4u CEO Tim Whiting at the end of 2008, Mobile can reveal. Talks are thought to have stalled at the time.

Phones 4u’s private equity parent company, Providence Equity Partners, is understood to be pleased with its £1bn deal for acquisition of the retailer in 2006. It has returned the initial equity and has paid a significant portion of the original debt taken to buy the business.

Despite suffering amid a declining market, Phones 4u’s share of new mobile phone connections was at a record high last month, and it is poised to announce a refurbishment of all its stores in the next six weeks.

Phones 4u declined to comment.